The US Dollar (USD) Outlook: A Mix of Activity and Data
The US Dollar (USD) is currently trading in a mixed fashion with no significant follow-through selling after the 50bp Federal Reserve rate cut last Wednesday. According to ING’s Chris Turner, investors have bought into the soft-landing narrative presented by Chair Jerome Powell, leading to continued optimism in the markets.
Key Data and Fed Speakers to Watch
This week’s US calendar is filled with a mix of activity and price data that could influence the USD’s performance in the coming days. Here are some key events to keep an eye on:
- S&P US PMI readings
- Consumer confidence data (Tuesday and Friday)
- Housing data (Wednesday)
- August core PCE deflator reading (Friday)
While none of these readings are expected to show a significant decline, Friday’s core PCE deflator reading is particularly crucial. Expected to be on target at 0.2% month-on-month, with a risk of 0.1% MoM, a lower-than-expected reading could trigger another decrease in US rates and the USD. Christopher Waller’s recent comments about low inflation data further emphasize the importance of this data point.
Moreover, this week will see a plethora of Fed speakers, including prepared remarks from Jay Powell on Thursday. Current market pricing indicates expectations of 35bp of cuts for the November Fed meeting and an additional 30/32bp for the December meeting. While this week’s US data may not drastically shift market pricing, the USD is likely to remain close to major support at 100.
Analysis and Implications
Overall, the USD’s performance in the coming days will be heavily influenced by a combination of economic data releases and Fed speakers’ commentary. Here are some key takeaways:
- Investors are optimistic about the soft-landing narrative presented by Chair Jerome Powell, despite the recent rate cut.
- Key data points, such as the core PCE deflator reading on Friday, have the potential to trigger significant movements in US rates and the USD.
- Market pricing indicates expectations of further rate cuts in the upcoming Fed meetings, which could impact the USD’s stability.
As investors navigate through a volatile market environment, staying informed about economic data releases and Fed speakers’ remarks will be crucial in understanding the USD’s trajectory and making informed investment decisions.